Ministers to scrutinise fat-cat pay

Trade and Industry Secretary Patricia Hewitt has launched a Government consultation paper on "fat cat" pay for company directors and executives who walk away from failing companies.

The long-awaited document, entitled Reward for Failure, will assess the controversy surrounding the drawing up of directors' contracts, and their performance and severance payments.

It will also seek views on whether further measures are needed to ensure that compensation reflects performance when directors' contracts are terminated.

Launching the paper Ms Hewitt said: "Britain has some of the best and most successful businesses in the world.

"But the good reputation of the majority is being tarnished by the bad practice of the minority.

"We have no problems with big rewards for big success, but shareholders are rightly concerned when directors leave failing companies and walk away with excessive payouts."

A DTI spokesman said: "The premise of the document remains that individual directors' pay is a matter for companies and their shareholders. The Government's role is to create a framework to allow shareholders to play their part in this process effectively and responsibly."

Shadow trade and industry secretary Tim Yeo said: "I entirely share the concern about excessive pay-offs for company directors who have failed.

"Some recent settlements have been offensive, especially to many loyal employees who have suffered from management incompetence. I welcome signs of greater shareholder involvement in pay decisions and I urge all shareholders to take a closer interest in remuneration policy."

The Confederation of British Industry has warned the Government against imposing legislation to curb executive pay ahead of consultation on whether new laws were needed. The consultation period will end on September 30.